Rainbow Rare Earths - Supply Agreement with UK-based Less Common Metals

11 September 2023

Rainbow Rare Earths Limited

("Rainbow" or "the Company")

LSE: RBW

Rainbow enters into strategic supply agreement with UK-based Less Common Metals to develop a responsible Western supply chain for rare earth elements

·    Rainbow will supply LCM with rare earth elements designated as critical minerals due to their essential role in the green energy transition

·    LCM is the only rare earth metal and alloy manufacturing facility in the UK and one of the only facilities in the Western world

·    Both Rainbow and LCM are aligned in their values and their ambitions to play a part in the establishment of a Western supply chain for critical rare earth elements

NEWS RELEASE

Rainbow Rare Earths is pleased to announce that it has entered into a strategic supply agreement with Less Common Metals Ltd ("LCM") to be a supplier of the magnet separated rare earth oxides neodymium and praseodymium ("NdPr"), dysprosium ("Dy") and terbium ("Tb"). These are the most economically important rare earth elements as they are used to make the permanent magnets essential to decarbonisation, via their use in electric vehicles and wind turbines, as well as to defence and other high-tech products.

These elements are also designated as 'critical minerals' in the UK's Critical Minerals Strategy as they are defined as having a high criticality for the UK, according to the economic vulnerability and supply risk criteria used for the assessment.

LCM is a world leader in the manufacture and supply of complex alloy systems and metals. The separated rare earth oxides supplied by Rainbow will be used for manufacturing into metal in order to create an alloy, which is then supplied to permanent magnet manufacturers in the EU and the USA.

LCM is based in Ellesmere Port, Cheshire; it is currently the only rare earth metal and alloy manufacturing facility in the UK and one of the only facilities in the Western world. Its location is of strategic importance to Rainbow as the Company's aim is to play a part in the establishment of a Western supply chain for critical rare earth elements outside of Chinese control.

This is in alignment with LCM's ambitions, which is currently in discussions to invest in expanded capacity in North America, the EU and Asia.

LCM has been looking to partner with a supplier with similar values in order to secure ethical supply of the feedstock required for their business and it has chosen Rainbow after a lengthy evaluation process of the various rare earth development companies globally. This decision was based on Rainbow's capability to take its rare earth material further downstream to the separated rare oxide stage, using the proprietary technology developed by, and in conjunction with, its partner K-Technologies, Inc.

George Bennett, CEO of Rainbow, commented: "Securing a buyer of our separated rare earth oxides that shares our values and aspirations was of strategic importance to Rainbow. We are dedicated to establishing an independent, responsible and ethical supply chain of the rare earth elements that are driving the green energy transition.

With over 30 years of experience in the manufacture and supply of metals and alloys to the permanent magnet industry, LCM is a fantastic partner for Rainbow. Using its expertise to expand in the USA and the EU, LCM will be instrumental in meeting the huge and growing demand for permanent magnets."

Albert Slot, Managing Director of LCM, commented: "LCM occupies a unique position in the rare earth pipeline as it is the only company in the Western world commercially producing both the highly specialised strip-cast alloys and all of the required rare earth metals needed for the production of the highest-performance neodymium iron boron magnets. Furthermore, LCM's expertise in the commercial production of neodymium metal and neodymium praseodymium alloy is unique in the Western world.

Given the concentration of the rare earth supply chain, a relationship with Rainbow offers the opportunity for LCM to secure ethical supply of all four of the magnet rare earth oxides vital for our business. This partnership will therefore ensure that together we can continue to develop a responsible and independent supply chain of rare earth elements to the benefit of the Western world."

Rainbow's Phalaborwa project is estimated to have one of the lowest costs of production of Western producers, as it will involve the processing of gypsum waste residue stacks, hence removing the cost and risk of mining. This low production cost gives the project resilience against rare earth pricing volatility in all plausible pricing scenarios, an important consideration for LCM based upon its 32 year history in the rare earth magnet chain.

Crucially, Rainbow expects to be able to supply all four of the permanent magnet rare earth elements, including the 'heavy' rare earths Dy and Tb, which are essential for improving the performance of neodymium magnets. LCM only recently expanded its metal making capabilities to include Dy and Tb and Rainbow will be one of the only producers of these oxides outside of Asia.

A framework will be set out in due course for Rainbow and LCM to negotiate a binding offtake agreement for separated rare earth oxides from Phalaborwa, with the ultimate customer of the rare earth permanent magnets being clearly defined and in alignment with both LCM's existing customer base and the positioning of both companies in an expanding Western supply chain.

Volumes will be driven by LCM's requirements for its expanded facilities, constrained by Phalaborwa's total productive capacity, and pricing will be as per published rare earth oxide prices at that point in time.  Any surplus production from Phalaborwa not required for LCM's facilities will be sold on the open market to third parties.

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Notes to Editors:

About LCM:

Less Common Metals is a world leader in the manufacture and supply of complex alloy systems and metals, and are specialists in those based on rare earth elements. With over 30 years of experience in the production of materials to tight compositional tolerances and controlled microstructures, LCM offers an innovative and highly flexible approach to a wide range of material requirements.

Since 2017, LCM has been making neodymium (Nd) and neodymium praseodymium (NdPr) metal on their premises in the UK commercially at +120 tons per annum. More recently (April 2023), the company expanded metal making production to dysprosium iron (DyFe), dysprosium (Dy) and terbium (Tb) to further enhance their expertise as a complementary supply chain alternative.

More information can be found at www.lesscommonmetals.com.

About Rainbow:

Rainbow Rare Earths aims to be a forerunner in the establishment of an independent and responsible supply chain of the rare earth elements that are driving the green energy transition. It is doing this successfully via the identification and development of secondary rare earth deposits that can be brought into production quicker and at a lower cost than traditional hard rock mining projects, with a focus on the permanent magnet rare earth elements neodymium and praseodymium, dysprosium and terbium.

The Company is focused on the development of the Phalaborwa Rare Earths Project in South Africa and the earlier stage Uberaba Project in Brazil. Both projects entail the recovery of rare earths from phosphogypsum stacks that occur as the by-product of phosphoric acid production, with the original source rock for both deposits being a hardrock carbonatite. Rainbow will use a proprietary separation technique developed by and in conjunction with its partner K-Technologies, Inc., which simplifies the process of producing separated rare earth oxides (versus traditional solvent extraction), leading to cost and environmental benefits.

The Phalaborwa Preliminary Economic Assessment has confirmed strong base line economics for the project, which has a base case NPV₁₀ of US$627 million[1], an average EBITDA operating margin of 75% and a payback period of < two years. Pilot plant operations commenced in 2023, with the project expected to reach commercial production in 2026, just five years after work began on the project by Rainbow. More information on the company is available at www.rainbowrareearths.com.